Trade and politics will weigh on Spanish economy

Subject

Slowdown in the Spanish economy.

Significance

Growth forecasts by the Bank of Spain and OECD have been revised downwards to around 2.0% this year and 1.6% in 2020. These revisions have been made against a slowdown in global trade, economic concerns in Catalonia and political uncertainty in Madrid.

Impacts

• Outbreaks of unrest in Catalonia are likely to weigh on tourism and the property market.
• Political uncertainty in Spain could further reduce the yields on Portuguese bonds.
• Low profitability in the banking sector, resulting in part from exceptionally low interest rates, will continue to drive bank restructuring.